Home Equity Line of Credit Pro and Cons
Home equity line of credit pro and cons are important if you
decide to tap your equity in your home. Whether you are choosing
a home equity loan vs equity line of credit, each loan is
considered a second loan and is secured by your home.
Here are some home equity line of credit pro and cons to make
your choice a little easier.
Pros:
Most home equity lines of credit have little or no closing
costs.
You only need to make interest only mortgage loan payments
which means lower monthly mortgage payments than with a fixed
interest rate loan.
Variable mortgage interest rates are usually much lower
starting rates than with fixed interest rate loans.
You can use the loan to draw on only as you need the money. You
only pay interest on the money used not on the entire loan
amount.
You can use the remaining unused balance of the equity line as
an emergency fund.
Cons:
Variable mortgage interest rates are not stable and could go
higher than a fixed interest rate loan.
Monthly mortgage payments are not level and can fluctuate a
great deal.
Most home equity lines of credit have yearly fees paid to the
lender.
With equity rates rising quickly it's easy to spend your all of
your home equity.
It makes sense to use the equity in your home to pay down debt,
or pay credit cards off. But use the money wisely and only use
as little equity as you have to.
Hopefully these home equity line of credit pro and cons will
make your choice of equity loans easier for you.
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